22 Responses to “How bad is third party processing?”

  1. Jackie says:

    What is “IPSP”?

  2. CCPrUs says:

    Internet Payment Service Provider.

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  5. Robert says:

    Do both Visa and MasterCard use same terminology for third party processing?

  6. CCPrUs says:

    Though none of the associations is fund of third party processing (and have its rule book to prove it…), both Visa and MasterCard have accepted the fact that merchant aggregation is a must and enable organizations to provide credit card processing services on behalf of other merchants.

    Visa uses Internet Payment Service Provider (IPSP), while MasterCard sticks to Member Service Provider (MSP) terminology for both direct merchant account resellers and aggregators.

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  9. Terry says:

    So what’s the difference between an ISO and an IPSP?

  10. CCPrUs says:

    An ISO is a reseller of merchant accounts. The ISO will never function as the merchant of record and therefore forever remains free of risks associated with running a merchant account.

    An IPSP operates, on behalf of other merchants, under its own merchant account (i.e. is the “merchant of record”), and takes full responsibility on transactions/refunds/chargebacks etc. running through its account.

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  12. Chandran says:

    Why do you need an IPSP account. Here, in India, any merchant can process transactions on behalf of other merchants, and many of them do!

  13. CCPrUs says:

    Chandran, theoretically speaking, anybody can do anything.
    Many people go over the speed limit, avoid tax payments, sell drugs, steal and even kill. Does it make you ask: Why do you need to obey the law?

    Same applies to a merchant account. You can work within the framework set by the associations and maintain your merchant account, or set your own set of rules, and watch your account terminated when your violations come to light…!

  14. Credit Repair Reviews says:

    I wouldn’t touch third party processing with a stick!

    It’s much more expensive, money takes forever to arrive, payment schedules turn to be non-predictable, you can’t be sure if you’ll get paid the money you’re entitled to or the funds withheld as rolling reserve.


  15. kam says:

    “Get a direct merchant account” sounds like a good advice, yet does not apply to many online merchants!

    We tried opening a direct merchant account and got rejected time and time again.

    Third party processing was the only solution we came up with, and so far, very pleased with what we’ve got…

  16. Monex says:

    3rd party merchant account will operate just like your own merchant account.

    With a 3rd party merchant account or eWallet Merchant Account you simply outsource your merchant hassles to a third party. You do pay for: set up, transaction, AVS and monthly fees yet BENEFIT from the services provided, you did not have to integrate, operate and put into place…

    Fees and services vary from one provider to another – check and compare!

  17. Emma White says:

    Guys, rolling reserve won’t kill you. Most chances are your acquirer will impose a rolling reserve mechanism on a direct merchant account as well.

    Actually, if your third party processor manages a rolling reserve mechanism, most chances are you are working with a sophisticated, secured, well risk managed provider and your chances for getting paid on a timely manner, are much higher with this kind of provider than with an institution with poor risk management.

  18. Lee says:

    What is a rolling reserve?

  19. CCPrUs says:

    A rolling reserve is a reserved account managed by your acquirer or third party processor, to which a portion of your processing volume is deposited.

    The funds are held by the acquirer to cover for the potential risk associated with your activity and is directly related to the risk perceived with your line of business.

    The pre-set rolling reserve percentage is deducted from each payment made to you. The amounts deducted are held for a pre-defined period and released to your possession once such period ends.

    A 10% six months rolling reserve means that 10% of your processing volume is withheld for a period of six months and released to your possession as of the seventh month.

    As the process continues on a monthly basis, reserved amount grows within the first six months. As of the seventh month, the acquirer maintains a relatively stable reserve amount, which is both released and withheld on a monthly basis.

    Once processing agreement is terminated, rolling reserve level decreases on a monthly basis, until no funds are held by the acquirer.

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  21. Merchant on the run says:

    What are the rolling reserve do’s and don’ts?

  22. CCPrUs says:

    Everything you ever wanted to know about rolling reserve, and more, is now posted at Rolling Reserve – the fine print.

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